How Spinoffs Affect Your Stocks

2021-08-11

Stocks and Spinoffs

When stocks you own spins off a segment or division of its business, the company you own changes.  Not only do you now have two companies instead of one, the parent or original company is no longer the same as it was prior to the spinoff.  Consequently, this can change not only the future prospects of the company you own, but also its historical valuations.

As a result, many data providers such as FactSet or Standard & Poor’s Capital IQ will adjust historical data to include fundamental metrics as well as prices.  By doing so, they allow the shareholder to look at the company past, present and future in the context of its current status and structure.  On the other hand, there would also be a benefit in being able to evaluate the company without adjusting the metrics and prices for the spinoffs.  In this video I will illustrate how FAST Graphs will be providing it subscribers the ability to evaluate their stocks both before and after any spinoffs occur.

Additionally, there is the old adage that statistics do not lie, but statisticians are darn liars.  In other words, if not understood properly – statistics can be misleading.  Moreover, this can even occur when the statistics themselves are actually correct.  The reason for this is that when dealing with common stocks there are several metrics that can be utilized where each provides greater insight and information.  The key is to be aware of what you’re actually looking at, and whether it relates to the attractiveness of the common stock you’re looking at or not.

In this video I will review:  Altria (MO), Philip Morris (PM), Mondelez International (MDLZ), Kraft Heinz (KHC), AbbVie (ABBV), Abbott Labs (ABT)

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Disclosure: Long MO, ABBV at the time of writing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

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